Guess Stock (NYSE: GES) surged 30% on March 17 following the announcement of a $13.00 per share takeover offer by WHP Global. The takeover proposal, pending review by a special committee, would allow WHP Global to purchase all outstanding shares except those owned by Guess’s co-founders Paul and Maurice Marciano and CEO Carlos Alberini, who together hold approximately 43% of the company. This rapid increase provides a welcome relief for investors after recent struggles in Guess’s stock performance. Notably, Guess already has a partnership with WHP Global, which acquired the Rag & Bone fashion brand in April 2024. This strategic decision has allowed Guess to broaden its presence in the luxury market by operating Rag & Bone stores and distributing the brand through upscale retail channels worldwide.
Since the beginning of 2024, Guess stock has fallen by 37%, underperforming the broader S&P 500 index that increased by 14%. This underperformance is primarily attributed to weaknesses in the Americas segment, coupled with high inventory levels and markdowns that have hurt the company’s profitability. Additionally, broader market volatility driven by the Trump administration’s new tariff implementations and rising trade tensions has contributed to the decline. The main factors behind this decline are as follows:
- a 42% drop in the company’s P/S ratio to 0.22 currently, compared to 0.38 in FY 2023; partially offset by
- a 10% increase in the company’s revenue, rising from $2.7 billion in FY 2023 to $3 billion (over the last twelve months); and
- a 6% decrease in total shares outstanding, reducing to 54 million.
We will explore the details of these factors. For more information, visit our dashboard on Why Guess Stock Moved. If you prefer a less volatile investment with strong upside potential, consider the High-Quality portfolio, which has outperformed the S&P and achieved over 91% returns since inception.
Guess Revenues were driven by robust sales in European markets, contributing over 50% of total revenues, although these gains were partially offset by declines in North American retail segments. The recent acquisition of Rag & Bone added further revenue, supporting the company’s overall top-line growth.
The retailer has faced declining foot traffic in its physical stores across the Americas, especially in North America, for several years. Although this region currently contributes over 33% of the company’s total revenues, management plans to reduce its share to approximately 25% in the future. To achieve this, Guess is restructuring its American retail and wholesale operations by closing underperforming stores, improving its product offerings, and strengthening its online presence with strategic marketing, celebrity endorsements, and targeted promotions.
Guess’s operating margin increased to 9.5% in FY 2024 from 9.2% in FY 2023, with adjusted earnings growing to $3.14 from $2.74, supported by a reduction in outstanding shares. However, the company expects a year-over-year decline in EPS for FY 2025, mainly due to higher marketing investments in international expansion and the integration of Rag & Bone. Furthermore, multiple downward revisions to guidance this year have adversely affected the stock, reducing the price-to-sales ratio from 0.4x in FY 2023 to 0.2x now, reflecting investor caution ahead of the full-year results.
The decline in GES stock over the past four years has been inconsistent and nearly as volatile as the S&P 500. The stock returned 7% in 2021, -9% in 2022, 18% in 2023, and -30% in 2024. In contrast, the Trefis High Quality Portfolio, which comprises 30 stocks, exhibits less volatility. It has also comfortably outperformed the S&P 500 over the past four years.
Given the current economic uncertainty regarding interest rate cuts and ongoing trade disputes, will GES stock continue to lag behind the S&P 500 over the next 12 months, or will it experience a strong rebound? From a valuation standpoint, we believe that GES has significant upside potential.
Our estimation of Guess Valuation stands at $17 per share, suggesting a potential 33% gain from current levels. Currently, Guess stock is trading at $13, with a price-to-sales ratio of 0.22x, which is below its four-year average of 0.4x. Moreover, the average analyst price target of $18 for Guess indicates nearly 40% upside, suggesting further growth potential.
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